New York Times’ circulation revenue lags growth in digital subscriptions

Wall Street rewarded The New York Times Co. with a 10 percent stock price increase Thursday after a second-quarter earnings report with several significant bits of good news:

  • For a second consecutive quarter, increases in circulation revenue more than made up for ad revenue losses.
  • Circulation revenue is pulling even with ad revenue for the company as a whole; at The New York Times itself, circulation revenue exceeds that from ads.
  • New York Times digital subscriptions passed the 500,000 mark, achieving 12 percent growth since March. Skeptics like me thought it might take a whole year to reach that.
  • And the company forecasts better ad revenue and profitability for the second half of the year as it moves past sharp traffic and revenue losses at its subsidiary.

All that progress is real, but the company’s figures mask a fast-shifting mix within its circulation base.

The increase in the number of digital subscriptions was measured from the previous quarter — not the norm in the industry, but maybe justified given its fast growth and the intense investor and public interest in the Times’ paywall.

But circulation revenue was compared to the second quarter of 2011. This time a year ago, three months after introducing the paywall, digital subs stood at 281,000, Chairman and acting CEO Arthur Sulzberger said Thursday.

So apples to apples, the number of digital subscribers rose roughly 80 percent in a year, but that yielded just an 11 percent gain in circulation revenue for the Times and the International Herald Tribune.

Why the discrepancy? Some theories:

First, part of it is simple math. Even at 500,000-plus, digital subscriptions are only about half the Times’s average daily print circulation. So two-thirds of the base is not growing nearly as quickly.

Print isn’t the culprit. The overall circulation revenue figure, of course, includes print. The company said that the Times has lost some circulation (6 percent daily, 2 percent Sunday year-to-year), but that it’s been mostly covered by price increases, most recently in the single-copy price of the daily paper. So that would be close to a wash, year-to-year.

Discounted subscriptions are driving the gains. I wonder how many of those digital subscriptions have been secured at deeply discounted, introductory rates and whether they now account for a larger share than they did a year ago.

The company’s financials do not indicate this, and Times spokeswoman Eileen Murphy declined to be more specific when I posed the question directly.

Denise Warren, chief ad officer and general manager of, did say in an earnings conference call that the gain in digital subs was boosted by three separate marketing initiatives during the quarter, and that more of the same is planned for the balance of the year.

Print subscribers are cutting back. Since print subscribers get digital access free, another possibility is that a substantial number of them are stepping down from daily subscriptions to Sunday-only. A subscriber would save several hundred dollars with such a switch; that would be a net circulation revenue loss to the company.

The company is making less money off new subscribers than it did from old ones who are dropping off. The cheapest digital subscription costs less than a third of a daily print one. And subs or single-copy sales on Kindle and other tablet devices cost considerably less than print. So it’s possible that new subscribers are choosing digital as some print subscribers drop away.

Warren also said that retention rates for digital subscriptions are excellent, though that doesn’t really quantify the extent of churn.

With all those variables in play, the company deserves the plaudits it is getting for keeping circulation revenues net positive. I’m still baffled, though, as to whether that trajectory can be maintained and at what cost.

Speaking of bafflement…

What’s behind the drop in digital ad revenue?

Murphy attributed the small year-to-year loss in digital advertising revenues to soft demand in national display and real estate classified — not to any loss in traffic for  Page views and time-on-site have remained steady, Murphy said, contrary to warnings from paywall critics that they would fall sharply.

During the earnings call, Times Co. executives said that advertising results remain volatile: down 6 percent year-to-year in April, 1 to 2 percent in May, 12 percent in June. (Gannett had reported the same pattern and roughly the same percentages earlier this month.) July will be down, but not nearly as much as June, they said.

Sulzberger said that the Times Chinese-language digital edition, launched in late June, is off to a strong start. He said that the company is in the planning stage for a number of other niche digital offerings.

Skill in managing that sort of digital growth, he said, is part of the expertise he is looking for in a new CEO, a search he expects to complete in the next several months. The Times’ Amy Chozick was more definitive, citing an unnamed company source who said a successor could be named by September.

For now, the Times Co. is outperforming the pack, especially considering that it has no broadcast earnings, which is a big help in a political and Olympics year at companies whose newspapers are not doing so well.

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  • cas127

    If things were truly so wonderful for the NYT in terms of digital subscriptions, why do their financials disclose so few details about them?

    Subscription churn, for instance. Or the % of subs that are (still) part of a promotional package, for another.

    There are lots of details that the NYT (“All the News We See Fit to Print”) is obscuring in its needlessly aggregated numbers.

    And why does the NYT picket fence paywall seem *more porous* lately (in contrast to orgiastic MSM reports)?

    And how sustainable is a business model that relies upon bleeding/deceiving your most loyal readers (those cover-to-cover lib-bots who haven’t figured out that a) the internet extends beyond the hallowed pontifications of the NYT and b) all the non-subscribing riff-raff is getting through more-or-less at will, no matter what St. Grey Lady asserts (with fingers crossed)).

    The NYT East German Paywall isn’t about keeping page-view spiking, drive-by unique visitors *out*, it is about keeping dim-witted, morally preening suckers *in*.

  • Stephen Judge

    The “commentators on websites” aint refereing to you, Rick. You have been far more circumspect than the digital triumphalists out there.

  • Stephen Judge

    This aint all that hard. The NYT has about 225,000 more subscribers now than they did this time last year. Over three months, at say, 20 bucks a months on average per customer, we get 225,000 x 20 bones x 3 months. We would expect to see the NYT make an extra 13,500,000 dollars over the quarter in circulation. Instead, they seem to have made an extra ~17,500,000 in the quarter in cirulation revs. Same ballpark. I will chalk up the discrepency to more people paying for the 30 dollar per month digital package than my model suggests.
    More importantly the gig is up…the Times as a whole is now growing revenue, and while they were gaining about 40k subscribers per quarter, now they just pulled in 54k in a quarter. Everyone who is waiting around for them to start slowing down might want to get a more comfortable seat, cause it dont look like its gonna happen. I am thrilled to see the NYT doing great. There are a lot of doubters out there who work as academics at NYC universities and commentators on websites who I hope are enjoying a tall cool glass of shut-the-hell-up right now. The NYT is a cultural treasure and an irreplaceable monument of journalism, and all the crowd sourced journalism that was supposed to replace it is a mushed up cesspool. The NYT could print on clay tablets and they would still beat blogger wanna-be journalists.